Australia’s resources sector has welcomed Kevin Rudd’s return by warning him not to consider making any changes to the mining tax, instead urging new policies to help secure productivity gains in an attempt to offset the tough market conditions created by falling commodity prices. Bill Beament, managing director of gold producer Northern Star, said the mining tax was a “disastrous policy that raised nothing and created so much uncertainty… To think you’d even entertain tweaking that in this environment is absolute suicide”.
Other global miners were more scathing of Australia’s policy framework and its detrimental effects on the mining boom. Anglo American chief Mark Cutifani said the mining boom had been undermined by “creating uncertainty and doubt in the minds of long-term investors”, while Peabody Energy chairman Greg Boyce said recent policies, including the carbon tax and renewable energy targets, had threated Australia’s position in the global coal market. Boyce also called for a national commission on resource sector competitiveness.
Mark Cutifani also warned that many more coal jobs would go in Australia, particularly as emerging competitors overseas begin to offer more attractive business prospects for mining companies. In an address to a Minerals Council of Australia conference in Canberra, Cutifani estimated 9000 jobs in coal had been lost in Queensland and NSW over the last 12 months, which was likely to “rapidly increase”. Meantime, Glencore Xstrata slashed a further 450 jobs from its Queensland workforce, taking the total cut within the industry for the past week alone to over 1000. The global company cited lower coal prices, higher costs and the strong Australian dollar as the basis for its decision.
Western Australian Premier Colin Barnett has called for a new national energy policy that would curb natural gas exports in order to meet a domestic quota, even though WA already has a reservation policy that sets aside 15 per cent of the output of new LNG projects for the state. “Any other developed country in the world will be ensuring that that clean, relatively clean energy is preserved — or some part of it preserved — for the national economy,” Barnett said. Allison Warburton, a partner at Minter Ellison, said gas legislation was largely the responsibility of state governments and not a federal issue.
The Association of Mining and Exploration Companies is confident that the prospect of an incoming Coalition government after the election could see the introduction of tax concessions that would boost exploration within the industry. This comes as Australia continues to lose its share of global exploration expenditure to other, more cost-effective parts of the world. AMEC vice-president Mike Young said the mineral exploration tax credit scheme that the group has proposed has received a “good hearing” from the coalition. “If the Coalition gets in, we think it will probably get enacted,” Mr Young said. “I think the industry needs it if we’re going to succeed and keep going in Australia”.
The Australian Financial Review
A report released this week by Infrastructure Partnerships Australia and BIS Shrapnel has revealed dramatic falls in new spending within the mining industry, showing that investment in the sector has peaked and that a backlog of work, rather than new projects, would be relied on to sustain output. Recruitment firm Hudson also released figures this week showing that net hiring within the resources sector dropped by 7 per cent compared to an 8 per cent gain across the economy more broadly.
In its quarterly report, the Bureau of Resources and Energy Economics has downgraded its forecasts for commodities exports from $186 billion to $177 billion due to falling prices and weaker demand from China. Chief economist at BREE Quentin Grafton said lower sentiment, equity fluctuations and volatility in foreign exchange markets led to lower price. The report outlined that concern over the slowdown in Chinese demand would continue to put downward pressure on prices over the short to medium term, particularly for iron ore and coal.
The Australian Manufacturers Workers Union is set to take on an aggressive campaign against floating liquefied natural gas technology, claiming it will “steal jobs and opportunity” for workers. This comes as Shell moves to a floating platform off James Price Point after previous onshore processing facilities had been shelved due to high costs. Outgoing Shell chairman in Australia, Ann Pickard, believes floating LNG could be the “saviour of Australia’s LNG industry”, allowing the local sector to ultimately win more export contracts at a time when labour costs in Australia are some of the highest in the world.
The West Australian
Speaking at a Minerals Council of Australia function this week, Opposition Leader Tony Abbott outlined the Coalition’s plan for the resources sector while criticising the government’s current policies. Abbott said Labor had imposed burdensome regimes of tax and regulation, which ultimately damaged investment and confidence in Australia. The Coalition, he said, would aim to restore confidence by abolishing the MRRT and the carbon tax, restore the Australian Building and Construction Commission, take workplace laws “back to the sensible centre” and reduce red and green tape by implementing a “one stop shop” for environmental approvals.
Atlas Iron chairman David Flanagan has slammed Kevin Rudd’s comments that the mining boom is coming to an end, saying they could be self-fulfilling. Flanagan said Australian politics would play a huge role in the direction of the mining sector over the next 12 to 18 months. “If they actually diminish confidence in our sector beyond what is, in reality, a wonderful place to invest, they can deliver an end to a resources boom by telling everyone it’s over,” Flanagan said.
The WA Chamber of Minerals and Energy and the peak oil and gas body has warned this week that an historic $292 billion oil deal between Russia and China will place huge pressure on West Australian producers in what has been described as a “wake-up call” for the local market. China is currently the second largest importer of Australian LNG behind Japan, however, many analysts tip China to become the number one importer in the near future. A spokesman for the Australian Petroleum Production and Exploration Association said the deal is an important and timely reminder that Australia’s attractiveness as a place to do business was under increasing criticism, particularly as low-cost competitors emerge.
The Courier Mail
Shell Australia chairman Andrew Smith has warned this week that Australia has become the highest cost nation for LNG plants due to the increasing shortage of skilled workers, particularly while there are currently seven LNG plants under construction. Smith said Australian governments needed to work harder to implement policy settings that provide business in Australia a more competitive framework in a global market. “We are now 20 to 30 per cent more expensive than the United States and Canada,” Smith said.
North Australia Weekly Digest – 28/06/13